Firms team up to bid for Tesco unit

International Business

Sat, 22 Aug 2015

Seoul: Private equity firms have formed three separate teams to bid for Tesco’s South Korean business valued at about $6 billion, in what is tipped as Asia’s biggest ever private equity deal, sources said yesterday.

Asia-based Affinity Equity Partners has linked up with US private equity firm KKR & Company, while Carlyle Group has joined hands with Singapore’s GIC.

And North Asia-focused private equity firm MBK Partners will seek equity funding from South Korea’s National Pension Service to bid for the unit.

The forming of the teams by the private equity firms reflects the huge size of the deal, which could potentially be the second-biggest merger in the Asian consumer sector, and the recognition that risks need to be spread because of the tough nature of the South Korean retail market.

KKR, MBK, GIC, National Pension Service and Tesco declined to comment. Affinity and Carlyle did not offer a comment.

Tesco, Britain’s biggest supermarket group, whose credit rating was cut to “junk” status by Moody’s and S&P in January, is battling to recover from an accounting scandal and reverse its market share losses in Britain to discount chains Aldi and Lidl. The sale of the South Korean unit is the biggest divestment Tesco is making to improve its financials.

Tesco hired HSBC for the sale of the unit, Homeplus, and in July shortlisted Affinity, Carlyle, Goldman Sachs’s private equity arm, KKR and MBK Partners.

Orion, a non-private equity suitor, was not shortlisted but remains interested in the sale.